Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

a. Accounts Receivable: List of customers and account balances.
b. Accounts Payable: List of vendors and account balances.
c. New Vehicles: Stock number, cost, amount floored (short term loan from bank for
auto), etc.
d. Perpetual versus physical inventory listings.
2. Separate Folders
Certain items which do not require a living ledger are kept track of by the typical dealership.
Examples include:
e. Fixed Assets
f. Prepaid Expenses
3. Other Dealership records to be aware of
g. Report of Sales Book: In California, it is required that all sales be reported to the
Department of Motor Vehicles within 5 days of sale in order to register the vehicles.
Analysis of this record will ensure the sales cutoff is proper at the beginning of the year
and at yearend. Agents should foot a sample to assure all sales are recorded in the
general ledger.
h. Car Jackets: A separate folder for each new vehicle sold which contains documentation
pertaining to this particular transaction.
Remember, each dealership is different and, therefore, it is paramount the examining agent require
someone truly familiar with the books and the business to detail the operations and the accounting
system at the initial interview.
Books and Records General Ledger Audit Example
Picture a General Ledger of about 10,000 pages for the year with only numeric reference points to
various transactions. In order to effectively sample items, a connection to source documents is
necessary. It is common where new car auto dealerships are concerned to break down the 5
traditional journals, (i.e., Sales, Purchases, Cash Disbursements, Cash Receipts, Payroll), into 15
different journal sources, with 15 applicable source codes to represent and include these
traditional books. Such a journal source setup would probably look very much like the following:
Source Code
Description
1 New Vehicle Sales
2 Used Vehicle Sales
4-4